The signals from China's cotton textile chain in May were far from uniform: yarn output growth slowed, mill margins narrowed, yet exports recovered month-on-month and the import mix underwent a notable shift. Cotton prices surged to a 2.5-year high before retreating sharply, and despite a modest late-month rebound on policy support, market sentiment had turned from bullish to cautious. For buyers and mills, the key question is no longer whether prices will rise, but how to adjust inventory strategies.
Off-Season Pressure Hits Yarn Segment, Ripples Upstream
According to the National Bureau of Statistics, May yarn output reached 1.869 million tonnes, up 2.7% year-on-year but down 1% month-on-month. Xinjiang's yarn output grew 18.6% year-on-year to 319,000 tonnes, yet also fell 3.6% from April. The slowdown stemmed directly from weak new orders: as the textile sector entered its traditional off-season, downstream garment brands reduced restocking, weaving mills lowered operating rates, and yarn purchases were limited to essential replenishment.
Yarn prices rose alongside cotton, but at a slower pace. The average price of 32s carded cotton yarn was 23,277 yuan/ton in May, up 795 yuan/ton (3.5%) month-on-month, while domestic cotton prices rose 3.6% over the same period. This meant mills' profit margins were squeezed, reducing their tolerance for high-priced raw materials. Mills bought cotton only on dips, causing industrial cotton inventories to fall 3.5% month-on-month to 846,000 tonnes, down 10.1% year-on-year.
Cotton Imports Plunge 31.7% MoM, Brazil Share Nears 60%
Customs data show May cotton imports at 113,000 tonnes, down 31.7% month-on-month but still up 2.3 times year-on-year. The sharp monthly drop was driven by weak off-season demand rather than supply constraints.
More striking was the rapid shift in import sources. Brazil's share surged to 57.7%, cementing its top position, while U.S. cotton rebounded to 22.1% after declining in previous months. Two factors explain this: first, the positive progress in U.S.-China trade talks eased concerns about purchasing U.S. cotton; second, Brazilian cotton, with its competitive pricing and reliable supply, is becoming the preferred choice for Chinese mills. Cumulative imports for January-May reached 825,000 tonnes, up 91% year-on-year, suggesting full-year imports could hit a multi-year high.
Exports Recover MoM, EU and U.S. Markets Lead
May textile and apparel exports totaled USD 25.6 billion, up 6.5% month-on-month, and although down 2.3% year-on-year, the decline was much narrower than in previous months. January-May cumulative exports reached USD 116.73 billion, up 0.1% year-on-year, signaling stabilization.
By market, exports to the U.S. and EU grew 24.7% and 25.6% month-on-month, respectively. This reflects the interim results of U.S.-China trade talks and the narrowing tariff gap between China and Southeast Asian countries, which has led some orders to return to China. Meanwhile, China's zero-tariff policy for African nations took effect, boosting demand from emerging markets. Cotton garment exports totaled USD 2.04 billion, up 11.9% month-on-month but down 3.7% year-on-year, indicating that cotton product exports are recovering more slowly than synthetic fiber products.
Cotton Prices Peak and Retreat, Spread Narrows to 2,270 Yuan
Domestic cotton prices followed a three-phase pattern in May: a sharp rally, a correction, and a modest rebound. Early in the month, expectations of tight new-crop supply and concentrated mill restocking pushed the CCIndex 3128B to 18,211 yuan/ton on May 7, a 2.5-year high. Then weakening off-season demand and falling international prices triggered a pullback. Late in the month, the announcement of a new Xinjiang cotton target price policy provided support, lifting prices slightly.
The monthly average domestic cotton price was 17,789 yuan/ton, up 23.1% year-on-year and 3.6% month-on-month. Internationally, the Cotlook A index averaged 92 US cents/lb, equivalent to 15,518 yuan/ton after paying a 1% tariff, making it 2,270 yuan cheaper than domestic cotton. The spread narrowed by 257 yuan from April but remained significant enough to support import demand.
New-Crop Planting Nearly Complete, Seedling Quality Lags
By end-May, 99.5% of the national cotton area had been planted, essentially complete. But regional progress diverged: Xinjiang was fully planted, while the Yellow River and Yangtze River regions lagged at 95.6% and 99.3%, respectively, both behind last year. Heavy rainfall in inland cotton areas caused waterlogging, slowing seedling development.
Nationally, 85.5% of cotton was at the 4-8 true-leaf stage, down 8.9 percentage points year-on-year. More critically, only 45.9% of surveyed farmers considered current seedling quality better than or equal to last year, a sharp drop of 34 percentage points. While 76.8% of fields reported light disease pressure, that share also fell 3.2 percentage points. Overall, new-crop yield expectations face downside risk, which will support prices on the supply side later.
Policy and Industry Initiatives Move in Parallel
At the 2026 China Cotton Industry Development Summit held in Chongqing in late May, nearly 400 domestic and international delegates discussed the theme "Transformation and Reconstruction." The meeting launched an origin evaluation program for cotton products, a noteworthy signal that amid global supply chain restructuring, Chinese cotton products are seeking clearer value certification.
The new Xinjiang cotton target price policy provides a floor for prices. The policy signal is clear: with planted area stable to slightly lower, ensuring farmers' income and stabilizing domestic supply are core objectives.